Can the Government and the public sector retain the necessary quality legal advice?

The recent announcement by Field Fisher Waterhouse (The Lawyer 6 August 2012) of their intention to move away from a formal focus on the public sector is the latest sign to date that many law firms are struggling with the challenge of working in this area. Unprecedented budget cuts and the need for efficiency savings have seen major initiatives requiring legal input disappear, along with significant, Cabinet Office led, downward pressure on fees paid to all consultants including lawyers.

But at the same time that Government and the public sector seek to reduce the fees paid on external legal support, the Government has embarked on an ambitious programme designed to transform the delivery of public services. NHS reform, viewed as possibly the largest change management programme in the world, service redesign and innovation in Local Government, increased partnering and collaboration with the private sector and an inevitable rise in litigation and judicial review means that, more than ever, the public sector need quality legal advice to help deliver the desired reforms.

Against the competing drivers of reduced spending and complex legislative change, can Central Government and the public sector retain the necessary quality legal advice and can firms maintain their support for public sector clients?

Reviews of Government spending by Cabinet Office and HM Treasury have clearly identified that Central Government has fallen behind their private sector counterparts in the procurement of legal services. A traditional lack of accountability and minimal pressure on legal budgets in the Civil Service has led to a dominance of Magic and Silver Circle firms advising the main Government Departments. Attempts to broaden the range of advisers and deliver better value for money for Government appear to have had minimal impact and these long-held relationships have proved resistant to change. However, the fiscal reality faced by Government Departments means that the “one size fits all” approach of the past is slowly disappearing. Across the whole of the public sector, buyers of legal services are increasingly recognising that the quality, and associated cost, of legal advice needs to be commensurate with the risk associated with the advice. In plain terms, a freehold sale in Farnham does not need the same adviser and cost base as the complex financial agreements associated with a bank bailout.

The specialist law firms advising Government and the Public Sector need to recognise that certain areas of work are becoming increasingly commoditised and can no longer attract a price premium. They also need to embrace the innovative and sophisticated pricing models used by the private sector – clients are increasingly looking for demonstrable value for money, risk sharing and performance related compensation from their lawyers.

Many also need to recognise that there are fundamental differences between advising the private sector and the public sector and either adapt to these differences or accept they can’t do both.

At the same time, the public sector and procurers of legal services need to recognise that many firms continue to show determined and long standing dedication to the sector and provide expertise and understanding of the complex legal issues their clients face. Continued attempts to apply the lowest possible cost to all legal services regardless of complexity, risk and specialism risk an impact on quality and, if pushed too low, more firms will be struggling to maintain their public sector focus.

At a time when the Government is attempting a transformation in public services, law firms dedicated to the sector continue to have an important role to play. In a market going through unprecedented change, ultimately, success will be dependant on a mutually beneficial relationship.